What you must disclose to buyers when selling a house

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An open house inspection generally involves an agent putting a sign up in front of the property and potential buyers or stickybeaks wandering through for about half an hour.

Besides imagining how their furniture will fit in the property, potential buyers need to put serious time and effort into finding out what exactly is being sold.

Freeway on the way?

There is every chance the pergola was added without council approval or the lovely open space out the back is not a nature reserve but a road reserve that could become a freeway in five years.

Each state has its own disclosure laws governing what information a vendor must make available to selling agents and buyers. Though the legislation differs between the states, it all aims to enable a legally binding, transparent sale.

The list of requirements is lengthy but the statement is drawn up by a solicitor and generally contains factors that could affect the sale of land such as mortgages and money owing on the home, planning controls, easements, covenants, rates or title defects.

Confusion reigns

But these can be unclear and confusing. In some states, it can be argued it is technically legal to sell a home without telling buyers someone was murdered in it, as the vendor and agent are not liable for anything about the residence that doesn’t relate to its physical aspects.

Melbourne agent and partner at Nelson Alexander, Bill Batcheler, sold a Collingwood home in August 2011 for $571,000. It was a good price as two people were fatally stabbed there in 1977. Many Melburnians remember the murders and the sale attracted a lot of interest. The history was not kept under wraps and the property sold on its merits to younger buyers unswayed by its past.

Dennis Kalofonos, managing director of Sydney Property Finders, says clients often approach a buyer’s agent after being stung on disclosure after buying their first or second property, and the lack of transparency has left them disappointed and cautious.

“Fortunately one of our analysts picked up on an old council document which showed the block fell within an area marked for higher density development, otherwise he would have bought it without knowing what could be built there.”

Illegal grannies

The disclosure process commonly exposes granny flats built without council approval.

“If a home owner has carried out illegal work on their home, chances are there will be half a dozen other problems; it’s never just the one thing,” Kalofonos says.

Aside from a house’s physical drawbacks, Kalofonos says it is imperative vendors note whether commissions are being paid to brokers and the percentage of the marketing budget that is going to an agent’s self-promotion.

It is also important for agents and buyers to keep abreast of changes to legislation. In 2010, NSW shifted its goal posts after a review and Consumer Affairs Victoria is assessing how its laws could change to reduce red tape.

In Tasmania, Consumer Protection Minister Nick McKim announced a review in 2012, calling current legislation “impossible”.

A bill to provide clearer information and expose illegal building works is expected to be introduced to the Tasmanian Parliament.

Queensland Ray White agent Glynis Austin recalls a vendor who legally built an addition to a property but did not have the necessary paperwork at sale time. The vendor had to pay for plumbing and termite inspections as well as building certification.

The Queensland method

Disclosure statements are not compulsory in Queensland. Due diligence is the responsibility of the buyer, who can order their own building and pest inspections.

“It’s very simple to buy a property here,” Austin says. “Most agents find out everything they can about the state of the property before they sell it.”

This highlights the one thing that can help buyers and sellers wade through the legal paperwork: establishing a good relationship with their agent.